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Escaping the Climate-Poverty Trap: Strategies for Small Islands

“Unlocking the Power of Parametric Triggers: A Solution for Climate Disaster Relief in Small Island Developing States”

The loss and damage fund should use parametric triggers to pay out when climate disaster strikes small island developing states

In July of this year, Hurricane Beryl tore through the Caribbean with winds reaching up to 240 km/h, causing catastrophic damage to Grenada’s northern islands of Carriacou and Petite Martinique, as well as several islands in Saint Vincent and the Grenadines. Union Island saw 90% of houses severely damaged or destroyed, with the island’s secondary school transformed into a shelter for the displaced residents. Many individuals have been pushed into acute poverty, unable to reopen businesses or return to work.

Small Island Developing States (SIDS) are facing increasingly severe storms, floods, and droughts. After the initial news coverage fades, these populations may endure weeks, months, or even years without essential needs such as safe drinking water, electricity, and permanent housing. This prolonged deprivation of critical infrastructure leads to multidimensional vulnerability, where entire regions or islands and previously stable individuals are plunged into crisis.

A recent study by the Overseas Development Institute (ODI) revealed that 20 million people, approximately one-third of the population in small island developing nations, are at severe risk of climate change-induced poverty. This vulnerability disproportionately affects poorer households and individuals, regardless of a nation’s development status, highlighting the need for proactive measures to address the impacts of climate-related disasters.

One potential solution lies in the use of parametric triggers within the loss and damage fund. Parametric triggers, commonly utilized in the insurance industry for events like floods and tropical cyclones, establish predetermined thresholds for compensation payouts. If specific criteria, such as rainfall levels or wind speeds, exceed these triggers, payments are automatically disbursed without the need for extensive damage assessments.

By implementing parametric triggers, the loss and damage fund can expedite financial assistance to those most in need following climate disasters. Governments can leverage existing social welfare systems and beneficiary lists to identify vulnerable individuals in advance, ensuring that payments reach those directly affected by extreme weather events.

This approach has proven successful in other contexts, such as the World Food Programme’s use of parametric triggers in Guatemala and the Sahel region to provide timely support based on climatic data. However, increased funding and targeted support for vulnerable countries are essential to the effectiveness of these mechanisms.

As negotiations progress towards COP29 in Azerbaijan and the upcoming meeting of the Fund for Responding to Loss and Damage board in December, prioritizing the allocation of resources to the most vulnerable nations and populations will be crucial. The implementation of parametric triggers within the loss and damage fund offers a promising solution to address the immediate needs of small island developing states facing the impacts of climate change-induced disasters.

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